The Reserve Bank of India in its second bi-monthly policy has reduced the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 7.5% to 7.25% with immediate effect. It has decided to keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liabilities (NDTL).
The government has cut this year's forecast for monsoon rains to 88% of the long-term average; raising fears of a drought in the country. Rainfall of less than 90% is considered to be a drought year. The latest prediction, however, has an error margin of 4% points either way.